Used-truck alternative disappearing for fleets

Fleets seeking late-model, low-mileage used trucks as a way to inexpensively replace older vehicles in their operations are going to have a tough time doing it as supply continues to tighten.

Fleets seeking late-model, low-mileage used trucks as a way to inexpensively replace older vehicles in their operations are going to have a tough time doing it as supply continues to tighten.

Bob Glenn, director of remarketing for Penske, told Fleet Owner that a year and one-half ago, the company’s used-truck inventory included just over 10,000 units listed for sale. By the fourth quarter of last year, however, that inventory had fallen to 2,800 units and remains at low levels. Altogether, Penske sold approximately 23,000 used trucks in 2010.

“Pent-up demand started in the first quarter last year and hasn’t stopped,” Glenn said, with tandem and single axle Class 8 day cab tractors displaying the most strength, though all models of used trucks in Penske’s inventory are selling well.

That demand spike even extends to trailers, he added.

“Demand for dry van trailers has been very solid the last six months,” he noted.

Glenn added that fleets of all sizes – from large national and regional carriers on down to small operators – are in the market, looking primarily for trucks with under 400,000 miles.

Steve Clough, president of national used truck dealership chain Arrow Truck Sales, noted at FTR Associates 2010 Transportation Conference that the used-truck shortage now occurring is due to the record low production rates of new trucks experienced during the past few years.

He pointed out that new truck production slipped from 133,000 units in 2008 to 95,000 units in 2009. It finished 2010 at 154,290, according to ACT Research, but even those numbers cannot restock the used-truck market.

Thus, combining that atypical spike in demand with low new-truck production rates from 2007 to 2009 – volumes that feed the used-truck market three and four years out – means used-truck supplies are going to be short for at least the next three to four years, Clough said.

Kenny Vieth, senior partner and general manager for ACT, told Fleet Owner that shortage is driving up used-truck pricing as well. He shared anecdotal evidence that one carrier recently sold 2009 model tractors with 250,000 to 300,000 miles on the odometer for $80,000 on the used market – trucks the carrier paid $95,000 for when brand new.

“That’s quite a premium for a truck that’s expended 35% to 40% of its operating mileage,” he said. “That gives you an idea of the valuation in the used market right now.”

Eric Starks, FTR’s president, added that many traditional “new-truck” buyers had been looking to acquire late-model, low-mileage used equipment over the last year as way to duck the upcharge associated with emissions control technology mandated for diesel-powered trucks sold after Jan 1, 2010. However, he pointed out that this option is rapidly disappearing from the market.

“The ‘good’ used trucks if you will – the later model, low mileage units – are not readily available anymore,” he told Fleet Owner. “So we’re now getting back to the ‘normal’ buying pattern in the truck market – new truck owners buying new trucks and used truck owners buying used trucks.”

Indeed, Penske’s Glenn noted that while some fleets are still looking to make 10 and 12 vehicle used truck “buys,” getting a group of such trucks together with similar specifications and with the right mileage is tougher and tougher to do. “It’s a struggle to find those kinds of vehicles in inventory now,” he added.